Income Tax Guidelines for the Financial

Year 2020-21
A ready reckoner for INVESTMENT DECLARATIONS.

This document provides information on relevant provisions of the Income Tax Act, 1961 with reference to Salary
Income - DEDUCTIONS AVAILABLE UNDER INCOME TAX ACT FOR SALARIED EMPLOYEES

Important:
➢ Any two of the below tax structures can be applied for tax computation
o New Tax Regime – Details here (page 2)
o Traditional (Old) Tax Regime – Details here (page 5)
➢ From April 2020, every individual employee gets an option to choose in between the new and
traditional (old) tax regime.
In case an individual fails to select any option, traditional tax would be applied (as stated under income
tax act finance bill 2020)
➢ Please note that investments /payments during the year April 2020- March 2021 alone will be considered.
➢ For Traditional (Old) Tax regime only - Under Section16 (i)(a) an individual salaried employee would be
eligible for a standard deduction of fifty thousand rupees or the amount of the salary, whichever is less,
for computing the income chargeable under the said head. This introduction of new clause will result in
omission of the below sections of existing income tax act -
o Section 17(v)(viii)(2): Under this section, an employee can claim exemption for any sum paid by
the employer in respect of any expenditure incurred by the employee on his medical treatment
or treatment of any member of his family not exceeding fifteen thousand rupees in the previous
year. This is generally termed medical reimbursement
o Section 10(14): Under this section, an individual can claim an exemption of Rs.1600 per month
for meeting the travelling cost.
o Note: Transport allowance for handicapped person of Rs.3200 per month remains the same.
➢ Tax exemption towards the Employer contribution to Provident Fund (PF), NPS and superannuation fund
restricted to 7.5 Lakh per annum. Thus, anything contributed over and above 7.5 Lakh would be taxable in
the hand of the employee.
➢ In case the investment declaration forms (online submissions) are not received by the due date, TDS will
be deducted based on the assumption that there is no investment.
➢ In case an individual fails to file income tax return on or before due date, then appropriate penalty would
be imposed on such defaulting individuals.
New Tax Regime

From April 2020, all tax-payers have the option to choose the "new and reduced" tax rates for themselves and plan
their annual investment accordingly.

TAX RATES:

Individuals less than 60 years:

Income tax slab Tax rate

0 to 2.5 Lakh 0%
2.5 Lakh to 5 Lakh 5%
5 Lakh to 7.5 Lakh 10%
7.5 Lakh to 10 Lakh 15%
10Lakh to 12.5 Lakh 20%
12.5 Lakh to 15 Lakh 25%
15 Lakh and above 30%

Individuals to 60 – 80 years:

Income Slab Tax rate

0 to 3 Lakh 0%
3 Lakh to 5 Lakh 5%
5 Lakh to 7.5 Lakh 10%
7.5 Lakh to 10 Lakh 15%
10Lakh to 12.5 Lakh 20%
12.5 Lakh to 15 Lakh 25%
15 Lakh and above 30%

Individuals above 80 years:

Income tax slab Tax rate

0 to 5 Lakh 0%
5 Lakh to 7.5 Lakh 10%
7.5 Lakh to 10 Lakh 15%
10Lakh to 12.5 Lakh 20%
12.5 Lakh to 15 Lakh 25%
15 Lakh and above 30%

• Note: 4% of Health & education cess is to be levied on the total tax payable.
• Surcharge @ 10% is to be levied on tax payable if the total income exceeding Rs.50 Lac but not exceeding Rs.1 crore, Marginal relief
if applicable.
• Surcharge @ 15% is to be levied on tax payable if the total income exceeding Rs.1 crore-2 crore, Marginal relief if applicable.
• Surcharge @ 25% is to be levied on tax payable if the total income exceeding Rs.2 crore - 5 crore, Marginal relief if applicable.
• Surcharge @ 37%% is to be levied on tax payable if the total income exceeding Rs.5 crore, Marginal relief if applicable.
Section 87A: Rebate of Rs.12500 for individuals having total income up to Rs.500000

(87A) An assessee, being an individual resident in India, whose total income does not exceed Rs.500000, the rebate
shall be equal to the amount of income tax payable on the total income for any assessment year or an amount of
Rs.12500, whichever is less.

Disallowed exemptions

While you may enjoy reduced rates of tax, you as a taxpayer must forgo the below listed exemptions and
allowances. Hence, if you choose the new tax regime no deduction or exemptions would be available under:

• All chapter VIA section – 80C, 80CCC, 80CCD, 80D, 80DD, 80DDB, 80E, 80EEA, 80EEB, 80G, 80GG, 80GGA,
80GGC,80IA, 80IAB, 80IAC, 80IB, 80IBA, etc. (Excluding Section 80CCD (2))
• House Rent Allowance under section 10 (13A)
• Leave Travel Concession under section 10(5)
• Special Allowance under section 10(14) (such as Children education allowance, Hostel Allowance,
Transport Allowance, Per diem Allowance, Uniform Allowance, etc.)
• Interest on borrowed loan for a self-occupied property (Rented property not covered) under section 24.
(Note: Interest claim for let out property remains the same)
• Standard Deduction, Entertainment allowance, Employment / Professional tax under section 16.
• Set off of any loss, under the head “Income from house property” with any other head of income;
• Any exemption or deduction for allowances or perquisite, by whatever name called, provided under any
other law for the time being in force.
• Income by way of daily allowance / any other allowance received by MP, member of state legislature, etc.
under section 10(17)

Very Important Note: If the Individual fails to comply the conditions mentioned as above; their option would be
considered invalid, and the taxes would be calculated as if the option had not been exercised for the assessment
year relevant to the previous year.

Allowable exemptions

Therefore, let’s understand the benefits that are applicable if one chooses the new tax regime.

- You may claim interest paid on a home loan towards a let-out(rented) house property under section 24.
However, please note that when you apply this interest to the calculations of income/loss from house
property (standard deduction of 30% of rental income and all applicable taxes), if there is net loss, the same
will not be adjusted against any other source of income.
- Section 80CCD (2) employer contribution under National Pension Scheme (NPS).
- Employer contribution to Provident Fund (PF), NPS and superannuation fund restricted to 7.5 Lakh per
annum.
- Gratuity
- Leave encashment on retirement
- Amount received on Voluntary retirement scheme (VRS) up to INR 5 lakh
Traditional Tax Regime:

The below exemption and details continue to apply if an individual employee chooses to
continue the existing (traditional) tax rules.

Individuals less than 60 years:

Income tax slab Tax rate

0 to 2.5 Lakh 0%
2.5 Lakh to 5 Lakh 5%
5 Lakh to 10 Lakh 20%
10 Lakh and above 30%

Individuals to 60 – 80 years:

Income tax slab Tax rate

0 to 3 Lakh 0%
3 Lakh to 5 Lakh 5%
5 Lakh to 10 Lakh 20%
10 Lakh and above 30%

Individuals above 80 years:

Income tax slab Tax rate

0 to 5 Lakh 0%
5 Lakh to 10 Lakh 20%
10 Lakh and above 30%

Note: 4% of Health & education cess is to be levied on the total tax payable.
Surcharge @ 10% is to be levied on tax payable if the total income exceeding Rs.50 Lac but not exceeding Rs.1 crore, Marginal relief if
applicable.
Surcharge @ 15% is to be levied on tax payable if the total income exceeding Rs.1 crore, Marginal relief if applicable.
Surcharge @ 25% is to be levied on tax payable if the total income exceeding Rs.2 crore - 5 crore, Marginal relief if applicable.
Surcharge @ 37%% is to be levied on tax payable if the total income exceeding Rs.5 crore, Marginal relief if applicable.

Section 87A: Rebate of Rs.12500 for individuals having total income up to Rs.500000
(87A) An assessee, being an individual resident in India, whose total income does not exceed Rs.500000, the rebate
shall be equal to the amount of income tax payable on the total income for any assessment year or an amount of
Rs.12500, whichever is less.
Allowable exemptions

1. HRA Exemption u/s 10(13A):

• An employee cannot claim HRA exemption if employee himself resides in his own house.
• An employee who does not pay rent for his/her accommodation is not eligible to claim HRA exemption.
Exemption under this section is allowed for those employees who pay rent for their accommodation. The
exemption is restricted to a minimum of:
o Actual HRA received
o Actual Rent paid Less 10% of the salary
o 50% of the salary if the rented house is situated at Mumbai, Chennai, Kolkata and Delhi and 40%
of the salary in any other case.
• HRA received, which is more than the above limits, is taxable. Salary for this purpose means, Basic,
dearness allowance if the terms of employment and Commission based on Fixed Percentage

Documents required to avail HRA Deduction

a. Copy of House Agreement along with Rent Receipts
b. Rent receipts given by Landlord
c. PAN / AADHAAR, name and address of the landlord in case the rental payment exceeds Rs.1 Lac for the
financial year.

Proof Of Rent Paid Should Give Details Of:

a. Name and address of landlord
b. Address of rented premises for which rent paid
c. Period for which rent paid & the amount

Note:
As per Form 12BB, if the Annual Rent paid by the employee exceeds Rs.1,00,000 per annum, it is mandatory
for the employee to report the PAN or AADHAAR Number, name and address of the Landlord.
Notification Link:
http://www.incometaxindia.gov.in/communications/notification/notification30_2016.pdf

2. House Property Exemptions

Interest paid on Housing Loan for self-occupied property u/s 24

Interest paid on housing loan availed for a self-occupied property can be set off against salary income. To avail
this benefit:
a. The house should not be vacant throughout the year.
b. House property should be in the name of the employee who claims this deduction.
c. If the capital for acquisition/construction of house is borrowed before 01-Apr-1999 the salary income can
be set off against interest paid subject to maximum of INR 30,000 per annum.
d. If the capital for acquisition/construction of house is borrowed on or after 01-Apr-1999 and the
construction/purchase is completed within 5 years before end of Financial year in which loan is taken, the
salary income can be set off against interest paid subject to maximum of INR 2,00,000 p.a.
e. If the loan taken for reconstruction or repairs or renewal of existing house, then the maximum deduction
can be allowed only to the extent of INR 30,000 per annum.
DEEMED LET OUT: From 2019 onwards, if an individual is in possession of more than one self-occupied house
property or vacant house property or house property occupied by the, the individual can choose two
properties of his choice as self-occupied. Any other property(ies) would be deemed as let out and notional
rental income would be calculated accordingly.

Note: The limit of Rs.2 Lac of self-occupied house property remains unchanged. Thus total interest for 2
houses cannot exceed Rs. 2 Lac (Irrespective what interest one is paying and also for self-occupied one cannot
carry forward the unclaimed value)

Interest paid on housing loan for let out property u/s 24

The rent received from let out property should be disclosed as an income. From the above income following
deductions can be claimed:
a. Property tax paid during the year for the let-out property.
b. 30% of Net Annual Value (Rental Income less Property tax) can be claimed for repairs and maintenance of
the house irrespective of the expenses incurred.
c. Interest payable on housing loan for let out property can be claimed as deduction with no upper limits.

Adjustment of Net Loss under house property (Section 71)

As per the amendment made during 2017 budget, set-off of house property losses (Section 71) against any
other source of income is restricted up to Rs.2 Lac only.
Thus, based on the above restriction, the overall net loss to be claimed under house property (irrespective of
let out or self-occupied or any number of house properties) would be restricted to Rs.2 lac alone. No amount
exceeding Rs.2 Lac would be eligible for the claim.
But in case there is any unadjusted house property losses would be eligible to carry forward and claim in the
next 8 years.
Employer has to set off the loss from house property with the salary income while calculating the tax liability
of the employee.

Additional deduction for Interest paid on Housing Loan for self-occupied property u/s 80EE

Individual can claim additional benefit Rs.50000 in case interest paid, if he complies with the below conditions:
a. First time home buyer in FY 2016-17 i.e. assesse doesn’t own any house property on the loan sanction
date.
b. Loan was sanctioned in between 1st April 2016 to 31st March 2017.
c. Loan sanction amount doesn’t exceed Rs.35,00,000.
d. Value of house property doesn’t exceed Rs.50,00,000.

Documents required for availing House Property Exemptions:

a. Statement/Certificate from Financial Institution / Bank for the interest payable on home loan giving the
breakup of interest and principle repayment and the date of loan sanction.
b. Duly Signed Declaration Form with details of House Property whether it is self-occupied or let out.
c. Completion certificate of the House Property.
d. Most importantly, in case of Joint Loan (Joint Names in Interest certificate), Joint declaration to be
provided stating amount of claim.
 e. Statement claiming that this is first house owned and have no pending home loan in his name (In case to
claim Section 80EE).

3. Deductions allowed under Section 80 C

a. Payment of Life Insurance Premiums for Self/Spouse/Children.

b. Contribution to Public Provident Fund for Self/Spouse/Children.
c. Contribution to Unit Trust of India in the name of self.
d. Investments in National Savings Certificate only in the name of self.
e. Interest accrued on National Savings Certificate (Copy of NSC Certificates of the previous years must be
submitted to get rebate on NSC accrued Interest).
f. Principal repayment on Housing Loan. Also Stamp duty and registration fees paid for acquiring the house
property.
g. Contribution (including Voluntary Cont.) to Employee Provident Fund.
h. Investments in National Savings Scheme (NSS).
i. Tax Saving Bonds / Infrastructure Bonds.
j. Investments in Tax saving Mutual Fund or Equity Linked Saving Scheme / Systematic Investment Plan
(SIP).
k. Child Education Expenditure.
l. Tax Saving Fixed Deposits (With Minimum Lock in period of 5 Years).
m. Investment in Post Office Time Deposits (With Minimum Lock in period of 5 Years).
n. Senior Citizen Saving Scheme 2004
o. Post Office Time Deposit Account
p. Sukanya Samriddhi Yojana:
a. The scheme applies to investment for girl child below 10 years.
b. Any amount deposited in specified post office account or any designated branch of PSU bank as an
investment for girl child restricted 2 girl children.
c. Minimum investment is Rs.1000/- and extend up to overall 80C, 80CCC, 80CCD limit of Rs. 150,000/-.
d. The scheme pays high interest i.e. @ 9.2%.
e. The account matures when the girl reaches 21 years, though up to 50%of the corpus can be withdrawn
after she is 18 or gets married.
f. The investments made in the Scheme, the interest accruing on deposits in such account and the
withdrawal from the said scheme in accordance with the rules of the said scheme will be exempt from
tax. Maximum investments under the above investment schemes are restricted to INR 1,50,000 per year.

Documents required to claim deduction:

Copy of Proof of Investment made during the current financial year.

4. Investment in Pension Scheme of LIC or any other insurer (e.g. Jeevan Suraksha of LIC or any
other Pension Plan) u/s 80 CCC

Premium paid for pension scheme is allowed as deduction from Total Income.
Documents required:
a. Copy of current year premium receipt
5. Investment in pension scheme created by Government of India u/s 80CCD

a. Under Section 80CCD (1) – Employee contribution for notified NPS up to a maximum of 10 % of (Salary +
DA)
b. Note: The maximum investment limit allowed under the above sections 80C, 80CCC, 80CCD (1) is INR 1,
50,000 per year.
c. Section 80CCD (2) employer contribution under National Pension Scheme (NPS). Please note that when
taken along with employer contributions to Provident Fund (PF) and superannuation fund this is restricted
to 7.5 Lakh per annum for tax exemption.
d. Under Section 80CCD (1B), an additional tax exemption of Rs.50,000 is to be provided for the amount
invested in National Pension Scheme. The amount of exemption is over and above the limit.

And the assesse can claim the NPS amount invested in one scheme either in 80CCD (1) or 80CCD (1B).

Note:
To claim under NPS scheme, all contribution needs to be made under Tier I scheme

Documents required to claim deduction:

a. Copy of Proof of Investment made during the current financial year.

6. Mediclaim Insurance u/s 80 D

Medical Insurance premium is allowed as deduction up to INR 25,000/- per year for self, spouse & dependent
children. An additional 25,000/- is allowed as deduction towards premium for parents (even if they are not
dependent).
In case of senior citizen above 60 years of age, then a total amount of 50,000/- can be claimed.

S No Immediate Maximum Dependent Maximum Maximum Eligible

Family (Self, Eligible in Parents Eligible in deduction in INR (inclusive
Spouse, Children) INR INR of Preventive Health
Checkup)
1 Senior Citizen 50,000/- Senior Citizen 50,000/- 50,000/- + 50,000/- =
100,000/-
2 Other than 25,000/- Senior Citizen 50,000/- 25,000/- + 50,000/- =
 Senior Citizen 75,000/-
3 Other than 25,000/- Other than 25,000/- 25,000/- + 25,000/- =
Senior Citizen Senior Citizen 50,000/-

Note:
Preventive Health Checkup for self, spouse, dependent children or parents are also allowed to the extent of
Rs.5,000/- per year (which is part of overall above limits

Advance payment claim:

Where premium amount is paid in lump sum in the previous year to effect or to keep in force an insurance on
the health of any person specified therein for more than a year: such amount shall be allowed for each of the
relevant previous year, a deduction equal to the appropriate fraction of the amount.

Documents required:
Current Year Receipt for payment of Mediclaim insurance premium.

7. Deduction in respect of maintenance, including medical treatment, of a disabled dependent

u/s 80 DD

The amount of deduction is

a. Rs.75,000 to a person with disability (above 40% and less than 80%), and
b. Rs.1,25,000 to a person with severe disability (Above 80%)

Documents required:
a. Form 10IA & self-declaration for expenses incurred for this specific cause
b. As per recent amendment, medical prescription providing all details of disease and patient is also
allowable document for claim instead of Form 10IA.

8. Deduction in respect of person with disability u/s 80U

Deduction is allowed for a person suffering from a permanent physical disability or mental
Retardation under sec 80U. The amount of deduction is:
a. 75,000 to a person with disability (above 40% and less than 80%)
b. 1,25,000 to a person with severe disability (Above 80%)

Documents required:
a. Form 10IA
b. As per recent amendment, medical prescription providing all details of disease and patient is also
allowable document for claim instead of Form 10IA.

9. Repayment of Education Loan u/s 80E

The total amount of interest paid for self and dependents towards education loan taken
 for higher education extended to all courses pursued after Senior Secondary Examination from any school,
board or university recognized by the Central Government or State Government or local authority or
by any other authority authorized by the Central Government or State Government or local
authority to do so will be allowed as deduction over a period of 8 years or until the interest is paid by the
assesse in full, whichever is earlier.

Documents required to claim deduction:

a. Proof for repayment of educational loan for the amount claimed

10. Investment made under an equity savings scheme (Rajiv Gandhi Equity Scheme) u/s 80CCG

As per budget 2017, No deduction under section 80CCG shall be allowed from assessment year 2019-20 for
the new or old investors.
COMMON / GENERAL DETAILS

1. Previous Employer Income

o Income period should be after 1st of April in the current financial year.
o Form 16 or a statement / certificate (form 12B) showing the computation of tax and the
income details with breakup along with seal of previous employer.
o Only salary after section 10 alone should be taken.
2. Previous Employer PT
o Profession Tax deducted by Previous employer for the current financial year to be taken
3. Tax Deducted by Previous Employer
o Tax Deducted and remitted by Previous Employer alone should be taken for deduction
o It should be for the period 1st April to 31st March of the current financial year.

4. Section 192A: Taxation for Pre-mature withdrawal of Provident Fund @10%.

a. Withdrawal of provident fund shall be taxable if the employee makes withdrawal before continuous
service of five years (other than the cases of termination due to ill health, closure of business, etc.) and
does not opt for transfer of accumulated balance to new employer, then such amount would be taxable
at flat deduction of tax at the rate of 10% where payment exceeds Rs.50,000/-.
b. However, some employees making pre-mature withdrawal may be paying tax at higher slab rates (20% or
30%). Therefore, the shortfall in the actual tax liability vis-á-vis TDS is required to be paid by these
employees either by requesting their new employer to deduct balance tax or through payment of advance
tax / self-assessment tax.
c. Filing self-declaration for non-deduction of tax u\s 197A of the Act shall be extended to the employees
receiving pre-mature withdrawal i.e. an employee can give a declaration in Form No. 15G to the effect
that his total income including taxable pre-mature withdrawal from EPFS does not exceed the maximum
amount not chargeable to tax and on furnishing of such declaration, no tax will be deducted by the
trustee of EPFS while making the payment to such employee.
d. Non-furnishing of PAN to the EPFS for receiving these payments would attract deduction of tax at the
maximum marginal rate.